An empty parking lot is located outside a closed JC Penney Co. store in Mt. Juliet, Tennessee on Thursday, April 16, 2020.
Luke Sharrett | Bloomberg | Getty Images
Just a few months after serving as interim CEO of J.C. Penney told Stanley Shashoua he saw signs of the business growing.
“J.C. Penney is a great American family destination and our strength lies in our well-known brands and the services we offer,” he said in a telephone interview. “We’re seeing improvements in business week by week and we are increasingly optimistic as we work on it.”
In particular, he spearheaded growth in housewares and sportswear – two categories that have done better over time Covid pandemic while Americans try to freshen up their homes and replenish their wardrobes with more comfortable clothes. More recently, Shashoua said, customers have been coming to Penney to shop for Easter dresses and other evening wear – another sign that people are ready to get dressed again.
Shashoua, who is also the chief investment officer of the largest US mall owner – Simon Property Group – has been at the helm of Penney since December 31st. At this point, the former CEO Jill Soltau left the department store chain abruptly Chapter 11 Filing for Bankruptcy seven months earlier.
Simon and the mall’s U.S. owner Brookfield came to the rescue late last year and bought nearly all of Penney’s bankrupt assets for $ 1.75 billion in cash and debt. That included control over around 670 stores, compared to the more than 800 Penney had when it was filed. No further store closings are currently planned.
The search for a permanent CEO is also underway, according to Shashoua, and the prospects are plentiful.
“We take our time,” he said. “We have had a lot of interest from a lot of highly skilled and highly skilled employees. And that’s very encouraging. People come to us and tell us they love Penney, grew up with Penney and are emotionally invested in it and have real views about the business. “
J.C. Penney didn’t show up overnight. Business had stalled for years due to the rise of e-commerce, and many analysts said management hadn’t invested in store modernization and modern merchandising. A heavy debt burden and the pandemic ultimately pushed them over the edge.
After going through the bankruptcy process, Shashoua said the Texas-based company has a stronger balance sheet and better liquidity, even though he didn’t provide any numbers. He said the focus has shifted to keeping the flow of money in the coffers. He added that vendor contracts were being scaled back and investments were being made in introducing more private label apparel and household brands.
“It’s a very similar approach in the early stages that we’ve taken with all of the other companies we’ve turned around,” he said.
Simon has already helped bring several retailers out of bankruptcy. These include malls-based retailers Aeropostale, Forever 21, Brooks Brothers, and Lucky Brand. The latter two filed for bankruptcy in 2020.
Simon CEO David Simon has said his company “made a lot of money” in his Aeropostale deal. He also told analysts, “We are certainly as good as the private equity folks when it comes to retail investing.”
To save Penney with Brookfield, Simon saw an opportunity in Penney’s loyal and diverse customer base. It also once had a Penney store in about 50% of its US malls, based on an analyst’s analysisThis has likely also piqued the landlord’s interest in investing in order to avoid further store closures in its own malls.
Simon Property shares are up more than 33% this year. It has a market capitalization of $ 42.7 billion.
Simon’s retail stores often include working with global brand owner and licensing company Authentic Brands Group, which is now also playing a role in revitalizing J.C. Penney is playing.
Shashoua said some of ABG’s clothing brands, such as Forever 21 and Juicy Couture, will be added to Penney’s range of in-store and online products. “2021 is more about rebuilding the company and I think you will see good growth in 2022,” he said.
According to Shashoua, Penney will focus on household goods, household goods for men in large and large sizes, goods for women in inclusive size ranges, and baby and children’s clothing in the coming months. He also wants to expand online retail, which now accounts for around 20% of Penney’s sales.
Of course, Penney’s path to profitable growth, winning customers back, and gaining market share in key categories like apparel and footwear will not be easy.
Consumers have increasingly stayed away from suburban centers, especially during the pandemic. Many have shifted their online shopping in favor of ecommerce giants like Amazon and Walmart. Clothing sales have also been hampered during the health crisis as Americans spent much less time getting dressed to get off.
U.S. consumer spending on clothing and shoes declined 48% yoy last April, when many retail stores selling apparel and accessories were closed for the entire month, according to a record from Coresight Research. More recently, spending in this category has risen again, up 0.8% in January, Coresight said.
Last year, department store operators Neiman Marcus, Stage Stores, Lord & Taylor and Century 21 filed for bankruptcy together with Penney.
Penney hopes to avoid the fate of the iconic department store chain Sears. Since filing for bankruptcy in 2018, Sears has slowly shrunk his store space to become a fraction of his former self.
“We are strengthening our retail foundations by focusing on modern retail, digital media and an engaging customer experience,” said Shashoua. “Retail is moving faster than ever … and that’s why we aim to act fast.”